Executive Summary: SaaS Landscape in India

Transcription

1 For complete report, send your requests to Executive Summary: SaaS Landscape in India This report is solely for the use of Zinnov client, Zinnov prospects and Zinnov personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from Zinnov 0

2 Agenda 1 SaaS Market Overview 2 Key Trends and Highlights 1

3 The domestic market for SaaS is estimated to be about USD 50 million and is currently dominated by Collaborative Applications and CRM workloads Workload-wise Distribution of SaaS Market in India, 2009 (USD Million) Total Market: USD million SaaS Collaborative Applications Market in India, 2009 (USD million) Security ERM 4 5 Others** 4 5 Collab. Apps* Company A B C Others Total SaaS CRM Market in India, 2009 (USD million) CRM Company A B C Others Total Nascent Market-With Couple of Early Movers The SaaS market in India is extremely nascent with a total market size of USD million. Three key workloads, Collab. Apps, CRM and ERM together contribute 80 percent of the market. With the market being so nascent, there are a couple of early movers who have cornered a large share of the market. These include Salesforce.com and Webex Note: Confidence Level for Market Size is percent, * Collab. Apps include web conferencing, productivity suites etc. ** Others include workloads such as storage, remote access, DBMS, BI, content apps. Etc. Source: Zinnov analysis 2

4 User Base Executive Summary: SaaS Landscape in India The market is still in an exploratory stage and is witnessing a multitude of offerings at varied price points Price Point Trends Across ERM & CRM, 2009 Synage (PPM) Ramco (ERP) Two largest players have 500+ customers each. The rest of the players have less than 50 customers About 80 percent of the customers and 70 percent of the users for ERM and CRM are SMBs Price Point (INR Per User Per Month) SaaS ERM Market in India, 2009 (USD million) SaaS Security Market in India, 2009 (USD million) Company A B C Others Total 0 Company A B C Total Note: Confidence Level for Market Size is percent Source: Zinnov analysis 3

5 A variety of constraints have hampered the growth of SaaS solution providers in India Broadband penetration & reach is relatively low. The active broadband subscribers in India was only about 5.5 Million as on Dec 2008 Focus of companies in Indian market is relatively new and lacks scale Most of these firms don t have the commitment/money to bank roll and scale these experiments Broadband Penetration Lack of Scale Reseller partnerships are critical since they have the bandwidth to effectively promote a product Majority of the SaaS providers are unaware of mechanisms to effectively leverage the channel Leveraging Resellers Constraints Pricing Companies have not been able to arrive at a comfortable price range for their offerings Piracy is also a major cause of concern for many of the solution providers Product Localization IT Support/ Training Most MNC s products in the market are global products with minimal R&D spend for India market requirements. There exists a lack of clarity about Indian workflows Majority of the SaaS providers don t have the bandwidth to provide IT support/ training for their users Note: *Broadband is defined as an internet connection with speed equal to or greater than 256 kbps Source: Interviews with Company Stakeholders, TRAI, Zinnov Analysis 4

6 However, a convergence of a variety of drivers can potentially enhance the growth of SaaS adoption in India, going forward With the cost of the high-end mobile phones/ smart phones decreasing Y-O-Y, there is a high probability that this mobile revolution would facilitate increased adoption in India Mobile Revolution With lower total cost of ownership (TCO), companies can access solutions such as ERM, CRM thus providing them a competitive advantage Pricing & Support Innovations Drivers for SaaS adoption in India Competitive Advantage Session/time-based pricing and innovative IT support through remote access has further incentivized the companies to adopt for SaaS Solutions Development of Supporting Ecosystem With rapidly evolving reseller networks such as Jamcracker etc, SaaS as a trend in India is picking up at a fast pace Source: Interviews with Company Stakeholders, Zinnov Analysis 5

7 Increased SaaS adoption will help SMBs optimize on their IT investments going forward IT System Spending Breakup in percent Discussion 65% 19% 16% SMBs share of IT spending in India is forecast to grow from 38% percent currently to over 50% by 2015 Professional services have higher PC penetration. A major chunk of their IT spending is contributed by PC, networking equipment, peripherals and productivity tools Software Hardware Services Some of the issues that constrained most SMBs from investing in IT infrastructure were cost considerations, inability to afford technical experts, and lack of awareness of the value of IT Source: Zinnov Analysis 6

8 Agenda 1 SaaS Market Overview 3 Key Trends and Highlights 7

9 The diverse Indian market landscape has presented a unique set of challenges that need to be addressed A significantly large base of SMBs present a huge opportunity for SaaS solutions in India India has 35 million SMBs whose IT spend is between 0.4 to 3 percent of their total revenues This limited IT spend makes SaaS, with its low total cost of ownership, an easy solution to offer to SMBs in comparison to on-premise solutions Also, there exist limited levels of IT purchase decision makers in SMBs, (less than 3) which reduces the sales cycle time for SMBs Broadband penetration in the top 10 cities in India is 2.56 million, with strong growth potential in the future Power downtime in most of the cities is a key challenge, with average restoration time of 71 minutes in the metros ; this challenge is more prevalent in sub-urban and rural India Market Penetration amongst peer companies is currently restricted to the tier-1 cities of Bangalore, Mumbai, Hyderabad, Pune, Chennai & National Capital Region (NCR) Customer awareness is critical for SaaS adoption; Effective Sales & marketing strategy can help address this issue Globally, sales and marketing (S&M) spend is about 50 percent of the overall budget for key SaaS players The need to create IT awareness through events, demonstrations and other offline modes (as compared to globally accepted online modes), will substantially increase the spend on S&M to acquire clients Innovative pricing models such as free to premium membership are being used to attract customers. For example, ZOHO has only 60 paid customers but a lot more free users of its solution, which helps create an awareness on the product and enables a try and buy model Global peer companies are finding it difficult to push solutions at their global price points because of the paying propensity of the Indian customer (Micro, SMB) is less compared to the global average. Hence they offer discounts on large user bases or offer entry points with reduced prices Unique price points & pricing models are critical to address the price sensitive market Source: Zinnov SMB Report, MAIT, Emerson Downtime Study, MSME, Zinnov analysis 8

10 The Indian market also has certain unique requirements that need to be addressed Delivering Tech Support and training on products is essential In a SaaS model, which is relatively new to most of the users, peer companies are grappling with ways to provide tech support and training in the market while keeping costs down For example, Tally, an on premise F&A solution provider has a 120 FTE dedicated inhouse support team and close to 500 Tally Authorized Service Centers that offer services ranging from post sales implementation to support. This system supports its huge base of 400,000 Tally customers Indian small businesses do not follow global best practices in business processes, and hence global products without customization may not fit their business needs For example, most Indian companies have a hierarchical sales force reporting structure; however, this is not a standard feature in many Sales Force Automation products currently in the market. ZOHO charges USD 10 per user per month to enable its users with this feature Product customization mapped to the need of the Indian businesses is a customer expectation and hence is critical Mobile devices are not being used as a primary access device for SaaS solutions currently, however SaaS suppliers predict an increased activity in this space in the future Though a few peer companies offer solutions enhancements on smart phones, mobile devices are currently being used only for point functionality SMS alerts India currently has 415 million mobile subscribers, however there were only 114,000 blackberry users (as on May, 2008), This disparity is constraining solution providers to restrict their offerings to point functionalities and not complete solution access Source: Interviews with company stakeholders, TRAI, Zinnov analysis 9

11 Ecosystem engagement is essential in a price-conscious domestic market The initial market leaders have a significant partner eco-system focus and this has helped them to build an early mover advantage India has a business landscape that requires a business to communicate with clients in at least 8 major languages. This requires a strong local channel partner ecosystem to scale effectively in the market Reseller & Channel Partners are critical for achieving scale in the market Telecom players could play an important role in the ecosystem for growth, payment collection and client servicing Peer companies have mentioned that clients prefer to pay via Demand Draft, Cheque or wire transfer and tracking payments is a challenge. Peer companies such as TCS (for ITaaS solution) are looking to leverage telecom players as a payment channel to increase efficiency and reduce overall cost of service delivery ISPs are being leveraged by peer companies to push commoditized IT solutions such as , security etc. The ISPs provide broadband access and are able to offer solutions that require limited value selling as an add on. This in turn reduces cost of sale. For example, F-Secure has partnered with Sify, Airtel, Reliance and Tata Indicom to offer its security products to consumers and SMBs Leveraging local ISPs to push low touch commoditized solutions is an effective strategy Source: Interviews with company stakeholders, Zinnov analysis 10

12 Online Marketing Strategy Channel Strategy Executive Summary: SaaS Landscape in India Channel partners and online marketing strategies are of paramount importance in a nascent market such as India 1 Direct Sales Team Extension Channel partners have been predominantly leveraged to extend reach of the direct sales team The partners are carefully selected to utilize their already existing distribution network, to provide the bandwidth for live demonstrations for customers and offer tech support/ training 2 Rebranding & Customization Some of the channel partners have been given the flexibility and freedom to rebrand and perform minor customization for the suppliers products for better market acceptance as the partners have a deeper understanding of the customer needs 3 Clustered Approach Some companies have adopted a clustered approach and have targeted specific geographic regions and have leveraged the local channel partner networks 4 Training Companies regularly conduct training and workshops to acquaint the channel partners with the product offerings and aid them in selling SaaS offerings 1 SEO Search engine optimization is looked upon as a very effective strategy to acquire customers. Customers through this route have exhibited better loyalty (stickiness) when compared to other marketing channels 2 Viral Marketing Viral marketing has yielded good results in India and companies have noticed increasing referral customers though there is no formal referral bonus incentive 3 Webinars Some companies have focused largely on customer acquisition through webinar and other online events Source: Zinnov Analysis 11

13 Companies have employed innovative channels to reach and engage their prospective and installed user base Strategic Alliances Salesforce.com and Google have formed a strategic alliance for SalesForce Group Edition featuring Google Ad-words, which provides every element of the customer lifecycle, from advertising, creating leads, closing business and retaining customers in one integrated solution Zoho partnered with Google to enable Google users to access all Zoho services with their single Google ID Integration with Social Media Zoho has launched Zoho applications (Zoho Writer, Zoho Sheet and Zoho Show) on the Facebook platform, enabling users to chat and work together through the social network Partnerships with Telecom Companies and ISPs SugarCRM has partnered with Tata Communications to offer its solution to SMBs and large enterprises Several companies such as F-secure, have partnered with Tata Indicom, Reliance, Airtel and Sify to provide on demand hosting, backup and security solutions to consumers and SMBs Indian gaming company Indiagames has tied up with several ISPs such as Airtel, MTNL, Tata Indicom to deliver Games On Demand SalesForce has launched an application on Twitter which enables SalesForce users to engage with their client base faster and more efficiently, either individually or en masse Source: Zinnov Analysis 12

14 Disruptive models such as those offered by Schoolmate and TCS are likely to drive SaaS adoption Payment IT + manpower ITaaS Stack L1 L2 L3 L4 L5 L6 Parents Hardware Networking Equipment Office Apps Business Apps-HRMS Custom Apps Inventory Management Business Intelligence Information Discussion Since the launch of Tally ERP 9 with sync feature, 85,000 of its total user base of 400,000, have downloaded the updated version Tally is leveraging its Tally Academies for tech support and creating awareness Tally has launched an Auditors ERP for the key influencer market of CAs Discussion SaaS + Support + Man power Schoolmate will deploy a technical person in each school, who will work fulltime on Schoolmate implementation in the school Discussion TCS Single point contact for SMB TCS will provide both IT infrastructure and software on Subscription model Remote IT support is currently being offered. Aggressively looking at Education, Healthcare and professional services market Source: Zinnov Analysis 13

15 Customer Base Executive Summary: SaaS Landscape in India A strong partner ecosystem enables access to the right target audiences, critical for workloads like ERM & CRM 1 Access to critical mass SaaS, as a model, is viewed as a business of volumes; reaching critical mass of customers is important for long-term sustainability Swipe a credit card model not likely for purchases in these workloads 150 Company C A larger number of partners can enable reach to a larger audience Comp B 3 Comp A 0 CRM Channel Partners Depth of Channel Partner Ecosystem Ramco has established a network of 55 partners who provide sales, implementation and support services Breadth of Channel Partner Ecosystem Ramco has focused on creating a varied channel partner base that can enable access to different sizes and types of customers Company A Training & Certification Ramco invests in regular training & certification of its partners Large IT services companies, companies having cluster focus and companies with a wide sales network are some of the types of Ramco partners Source: Interviews with Company Stakeholders, Company Websites, Zinnov Analysis 14

16 Marketplaces like Jamcracker, have been successful in sales of solutions such as web conferencing & security Easy access to prospective customers Market places like Jamcracker & Sparx provide easy access to a larger pool of prospective customers who are actually looking out for solutions to their problems and are open to SaaS as a model Lower cost of new customer acquisition Resellers on the marketplace can up-sell/ cross-sell to the existing customers accessing the marketplace, more cost effectively than acquiring new customers through other marketing channels Support & Training Resellers get added benefits such as L1, L2 end-user support from the India center, sales training, technical support, and marketing support programs, automated billing and settlement of subscription-based services Source: Interviews with Company Stakeholders, Company Websites, Zinnov Analysis 15

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